Question

An increase in the general price level is termed

a) the Consumer Price Index

b) inflation

c) deflation

d) stagflation

The CPI for 2012 was 177.1 and the CPI for 2013 was 179.9. The annual rate of inflation between these years was ________.

A) 2.8 percent

B) 79 percent

C) 3.6 percent

D) 1.6 percent

The aggregate supply curve is defined as the

A) sum of wages, rent, interest, and profits

B) real GDP purchased at different possible price levels

C) total dollar value of household expenditures

D) real GDP produced at different possible price levels

Answer 1

1. B) inflation
(An increase in general price level in the economy is termed as inflation whereas a decrease is termed as deflation.)

2. D) 1.6 percent
Inflation = [(CPI for 2013 - CPI for 2012)/CPI for 2012]*100 = [(179.9 - 177.1)/177.1]*100 = (2.8/177.1)*100 = 1.6%

3. D) real GDP produced at different possible price levels
(Aggregate supply is the total supply of different goods at different prices. So, it is basically the real GDP produced at various prices.)